How much would electricity cost us if it were not for renewable energy?
According to a report from the International Energy Agency (IEA), electricity consumers in the European Union (EU) benefited from approximately EUR 100 billion in savings during the period of 2021-2023. These savings are attributed to the electricity generated from photovoltaic (PV) installations and wind farms, which contribute to lower electricity costs.
New renewable energy installations have played a crucial role in substituting roughly 230 terawatt-hours (TWh) of energy that would otherwise have been generated from fossil fuels since the Russian invasion of Ukraine. This shift has contributed to reduced wholesale electricity prices across all European markets.
The International Energy Agency’s report indicates that without the presence of renewable energy sources, the average wholesale electricity price in the European Union in 2022 would have been approximately 8% higher.
Electricity prices in the EU. Source: IEA
Response to the reduction of Russian gas supplies
Following the Russian invasion of Ukraine, Russian natural gas supplies to the European Union saw a significant reduction of 80% during 2021-2022. This led to a substantial increase in the average monthly price of natural gas, which grew tenfold from January 2021 to August 2022, along with a fivefold increase in the price of hard coal.
Consequently, the cost of electricity generation from natural gas, which typically influences pricing in most EU wholesale markets, soared to nearly EUR 800 per megawatt-hour (MWh) for Open Cycle Gas Turbine (OCGT) plants and EUR 500/MWh for Combined Cycle Gas Turbine (CCGT) plants.
In 2021 and 2022, the European Union installed approximately 90 gigawatts (GW) of photovoltaic and wind energy systems. These projects replaced nearly 10% of electricity production derived from hard coal and natural gas. Further plans include the launch of wind and photovoltaic projects in 2023, with a combined capacity of 60 GW.
The total investment in photovoltaic and wind installations from 2021 to 2023 is estimated to be around EUR 200 billion. Almost half of these investment costs are expected to be recouped in the form of savings on energy consumers’ bills by the end of 2023.
As per the International Energy Agency (IEA) forecast, these savings could be approximately 15% higher if EU countries expedited support policies for renewable energy. The simplification of rules for connecting micro-installations and reducing bureaucratic barriers for advanced-stage projects were also emphasized as important factors.